How To Decide How Much To Spend on Digital Marketing?

Recently I met with a friend who’s working for a financial major and he’s been trying to slice the marketing spend on digital media and allied efforts. Now his’ was an unique dilemma i.e. how to splice the cash pool into various marketing efforts, especially in digital marketing. Though every brick and mortar company has a set way of spending money on various marketing activities but digital marketing or social media requires different way of sorting out. On top of that, since digital marketing as an added medium to connect with consumers has evolved recently in India, so that task in hand becomes all the more difficult.

After that conversation, I tried to connect with other friends trying to understand more into this dilemma. Although I couldn’t found any set pattern in digital spend in Indian companies but overall we can say that approximately Indian companies spend about 10-15% of marketing & advertising budget in digital. And my assumption is that’s the figure which will come from the companies who have accepted digital as a new way of connecting with customers. There are many more who are skeptic and a lot of them totally denying that digital can at all act as a medium even.

Now I don’t want to get into the debate of should companies accept digital as new age medium but surely there’s lot of context that digital can provide which other mass mediums like television, print, radio etc might have missed all these years.

Now when do got a task like this in-hand, the easier way to go forward is to find out who all in the industry are doing the digital way i.e. benchmarking against own peer set. It’s obvious that industry benchmarks are always helpful since it gives a neat picture as in how the industry’s convictions are placed or I should say divided.

But that’s a problem. I mean, what if a specific industry is so fragmented in media spends that not too many companies have taken it to digital. So what should be done in that case? So I’ve tried to come with some pointers which might help:

1. Classifying your company vis-a-vis industry average: It’s always true that most of the companies won’t & can’t be innovators. So it’s obvious to say that we can’t expect every company to be a maverick and totally give-in to digital marketing as the only way to go forward (also I believe that would be wrong initially since Indian market is way different from matured developed countries like US). So, companies should primarily try to benchmark itself vis-a-vis its peer companies in digital spending and if that’s not the case for a specific industry then its always better to classify itself & benchmark against other industry. For example, if you’re a mobile payment services company, its right to say that it can benchmark itself with telecom companies and accordingly go with the digital spend. Though both these industries are markedly different yet both show similar patterns in growth, revenues etc.

2. Understand customers more than industry averages: This point goes one-step beyond what I just said in my first point. What I mean is, it’s not always correct to presume your budget to be in-line with industry averages. What’s more important is to understand your business model and customers and see how digitally they are wired and then adjust the spending accordingly. This way, we can mitigate risk, if et all, which any company is exposed to in going digital.

These are two most crucial ways of taking your company to digital doorstep. Although I’ve assumed some of the factors in between but I’m sure if any company is jittery about taking those first steps, then these 2-step strategy might help them and in the process expose them to newer ways of understanding digital as a medium initially.

Sorry I didn't found any such reports for Indian market but surely there are plenty for US markets from eMarketer or Forrester research. But some research was done by WebChutney on digital marketing called "Digital Media Outlook Report 2009" http://bit.ly/4iZ2ng which might help you.